In his first address to Congress, President Trump cited a recent National Academy of Sciences report to argue in favor of a radical overhaul of the American immigration system. In particular, he used the NAS report to support his claim that the American economy is hurt by immigrants.
Here is his reference to the report, in context (emphasis added):
The current, outdated system depresses wages for our poorest workers, and puts great pressure on taxpayers. Nations around the world, like Canada, Australia and many others — have a merit-based immigration system. It is a basic principle that those seeking to enter a country ought to be able to support themselves financially. Yet, in America, we do not enforce this rule, straining the very public resources that our poorest citizens rely upon. According to the National Academy of Sciences, our current immigration system costs America's taxpayers many billions of dollars a year.”
As the chair of the panel of scientists convened to write that report and one of the consultants who analyzed the effect of immigration on government budgets, we can state unequivocally that this was not our conclusion. Our report looked at the evidence from all sides and found that the economic and fiscal consequences of immigration are generally positive, or at least not likely to be negative. How, then, can the report be used to argue the opposite?
It’s possible precisely because we did examine the evidence from all sides. President Trump took advantage of a rhetorical vulnerability inherent in scientific evaluation: Because we presented evidence from an array of sources, someone who seeks to support a particular position can dig out findings or statistics to support the conclusion he or she prefers. President Trump, or his speechwriters, cherry-picked some of our results related to government budgets and ignored the overall positive impact that immigrants have on our economy (a positive impact that in turn supports the health of public finances). To redress the imbalance, we provide a more comprehensive summary here.
The panel was convened to address a very complex question: What are the economic and fiscal consequences of immigration? This is a difficult question because immigration affects virtually every aspect of the economy and, moreover, because outcomes may vary across time and place. Such temporal and regional differences may reflect the size of immigrant inflows, the characteristics of natives and incoming immigrants, and prevailing economic conditions. Further, some processes (such as the expense of educating the school-age children of immigrants) are set in motion immediately upon immigrant arrival, while others (such as the labor market and fiscal returns on that investment when the child becomes a working adult) unfold over many years. Our panel gathered the evidence, looked at the data, and sought to do justice to the full range and complexity of the issues. Here are some of our major findings.
Immigrants are more skilled and educated than you probably think
First of all, many of us have an outdated idea of the level and kind of immigration occurring today. Since the 1990s, more immigrants have been arriving every year — but the size of these flows relative to the total population has stabilized. Moreover, the new arrivals, though still less educated on average compared with native-born persons, are more educated and come from a more diverse set of countries of origin than the immigrants arriving at the end of the 20th century (see the chart below for the educational distribution of recent immigrants over time). Indeed, today’s immigrants are more likely to have education beyond college than the native-born.
That observation includes both legally authorized and unauthorized immigrants. Conventional data sources do not permit us to break this down further, but some data is available on the unauthorized immigrants; and here, too, many of us have inaccurate views, particularly relating to how large these flows are. The population of unauthorized immigrants has indeed increased, almost doubling since 1995, to a total of about 11 million today. However, the annual net inflow of new unauthorized immigrants has essentially stopped since 2009: It’s been at or below zero since that year, according to the Pew Research Center.
What about impacts on wages and employment? Over all, when measured over a period of 10 years or more, there is little evidence of a negative effect of immigration on the wages or employment of natives overall. When there was evidence of negative impacts, they were mostly visited upon prior immigrants and those natives with the lowest levels of skills and education — those lacking a high school degree. This is likely the section of the report referred to in the president’s speech, but even here the research produced a range of evidence and was far from unanimous in finding negative effects.
The panel looked across the relevant studies at estimates of what would happen to the wages of the least educated native-born Americans if immigration raised the total supply of labor in the US by 1 percent. Those studies came to a range of conclusions —from a decrease in the wages of these workers of 1.7 percent to no effect to a modestly positive increase of 0.1 percent. What’s more, while not an issue examined directly by our panel, most research suggests that the primary source of worsening wage outcomes for the lowest skilled among US workers is technological change, not immigration.
No evidence of a penalty for native-born workers with a high school degree
Moreover, we found virtually no indication that immigration adversely affected the wages or employment of native-born, high school–educated workers, the people whose economic problems are sometimes pointed to as a reason for curbing immigration — and whose economic angst played a part in fueling Trump’s successful presidential bid. Again, the major reason for negative trends for this group appears to be technological change. A more surefire strategy to raise wages of less skilled workers than restricting immigration is to raise their skill levels by investing more in education and training.
Our report also found that immigration produced many concrete economic benefits. A strongly supported finding of the report is that immigration is integral to the nation’s economic growth. The inflow of labor supplied by immigrants has helped the United States avoid the problems of other economies, such as Japan’s, that have stagnated as a result of unfavorable demographics — particularly the effects of an aging workforce and reduced consumption of housing and other durable goods by older residents.
In addition, the infusion of human capital by high-skilled immigrants has boosted the nation’s capacity for innovation, entrepreneurship, and technological change. Research suggests, for example, that immigrants to the US have substantially raised the number of patents granted per capita, which ultimately contributes to productivity growth. The prospects for long-run growth in the United States would be considerably dimmed without the contributions of high-skilled immigrants.
Moreover, in shutting the doors to lower-skilled immigrants, the nation would lose their many economic contributions, such as their role in making goods and services like child care, house cleaning and repair, food preparation, and construction more available and affordable.
The question of whether immigration costs native-born taxpayers extra is trickier
How do these impacts on economic growth relate to the question of how immigration affects taxpayers? In general, the stronger economic growth is, the healthier government budgets are: Tax revenues go up as incomes and profits rise, and expenditures on need-based public programs go down. We would be sacrificing these benefits if we did not have immigration. But what of the narrower issue of whether immigrants receive more in benefits than they pay in taxes right now? Setting aside their contributions to overall growth, are immigrants a fiscal boon or burden?
It is important to consider this question in context. We are a debtor nation — that’s what the existence of the widely discussed budget deficit means. This in turn means that the “average American” is a fiscal burden, receiving more in benefits than he or she pays in taxes. Thus, our report includes estimates suggesting that a fiscal shortfall exists for both natives and immigrants. From that narrow perspective, President Trump’s reference was not technically in error — but it was misleading because he neglected to mention there is also a shortfall for the native-born as well as immigrants.
Whether immigrants are an even worse deal than natives for government budgets depends on how we account for government spending on things that do not necessarily cost the government more to provide when the population increases — notably, defense spending and interest payments on the debt.
If these costs are attributed equally to immigrants and natives on a per capita basis, immigrants appear costlier to government budgets than do the native-born. Our analysis of the data under this assumption found that immigrants accounted for 17.6 percent of the population and 22.4 percent of the deficit; in contrast, natives accounted for 82.4 percent of the population and 77.6 percent of the deficit.
However, if the costs of items like national defense and interest payments on the debt are excluded for immigrants, on the rationale that an additional immigrant does not cause these costs to increase, the results are different. Under that assumption, immigrants instead help native taxpayers by sharing the burden of paying for these collective costs while not increasing their level.
Here’s one way to think about this kind of government spending, which plays a central part in our analysis: Deporting immigrants or reducing annual quotas would probably not reduce defense spending or interest payments, so such a policy would not lift the burden that foes of immigration say non-immigrants are bearing. Indeed, natives would be negatively affected to the extent that they would have fewer people to share those costs with.
States may bear some costs that the federal government later recoups — an argument for fairer cost sharing, not immigration restrictions
When thinking about fiscal impacts, it is also important to realize that a snapshot of today gives a limited picture. That is why the report also looked at tax and benefit flows over time, observing an immigrant from arrival and projecting his taxes and benefits and that of his or her descendants over the next 75 years. From this perspective, does the arrival of an additional immigrant help or hurt?
Again, the answer depends on what we consider the costs of an immigrant, but it also depends on future government budgets and the characteristics of future immigrants. In most of the scenarios in the report, immigrants and their descendants are a net fiscal benefit. Indeed, second-generation children are fiscal powerhouses, out-earning and out-contributing their native-born peers. The nation’s investment in public education and other services for them is more than paid back over time.
The tax partnership between the federal and local levels of government deserves some attention here, because of the asymmetry of costs and benefits. More of the long-run fiscal benefits of immigrants accrue to the federal Treasury through the tax payments of adult immigrants and their grown children. In contrast, more of the short-run costs of immigrants are borne at the state and local level, principally in the form of education expenses for their children that train more productive workers and taxpayers for the future. This creates a disconnect in time between the local costs (sooner) and the federal benefits (later).
Policymakers should recognize that in high-immigration states, the costs of educating the children of immigrants could have negative impacts on state and local government budgets. Because the federal Treasury will later benefit from this, a larger federal role in shouldering these costs might make sense.
Finally, the historical data showing that immigrant flows are becoming better educated — as educational attainment rises in immigrant-sending regions — is relevant to fiscal impacts. If this trend continues, the fiscal impacts of foreign-born persons relative to natives will likely continue to improve.
In short, the panel’s comprehensive examination of the data on this contentious subject revealed many important benefits of immigration — including on economic growth, innovation, and entrepreneurship. And it found little to no negative effects on the overall wages or employment of native-born workers in the long term. Where negative wage impacts have been detected, native-born high school dropouts and prior immigrants are most likely to be affected. But even there, the evidence is far from unanimous in finding negative effects for natives.
The fiscal picture is more complex, and depends in part on how one allocates costs associated with government expenditure on defense and the national debt. Under a reasonable scenario in which those costs are not attributed to immigrants, immigrants are a fiscal boon overall, but there are negative effects evident at the state level when the costs of educating the children of immigrants are included.
On the other hand — importantly — these children of immigrants go on to become some of the most positive fiscal contributors in the population.
Francine D. Blau is the Frances Perkins professor of industrial and labor relations and professor of economics at Cornell University. She was chair of the National Academy of Sciences panel on the economic and fiscal consequences of immigration. Gretchen Donehower is a research specialist in the department of demography at the University of California Berkeley. She was a consultant to the panel.
The Big Idea is Vox’s home for smart, often scholarly excursions into the most important issues and ideas in politics, science, and culture — typically written by outside contributors. If you have an idea for a piece, pitch us at firstname.lastname@example.org